Financial Ombudsman Service  

Intrinsic ordered to compensate cold-called client

Intrinsic ordered to compensate cold-called client

The Financial Ombudsman Service has ordered Intrinsic Financial Planning to compensate a client who was cold-called by an appointed representative of its network in 2013. 

In a decision upheld in May the ombudsman ruled the client had been unsuitably advised to transfer into a self-invested personal pension (Sipp) by an appointed representative of Intrinsic, a recommendation for which the authorised company is ultimately responsible. 

The client was first cold-called by the adviser in 2013 with an offer to review his financial arrangements, which he accepted with regard to his pensions. 

When the client met with the Intrinsic adviser he was aged 51, married with no dependent children, self-employed with an income of £20,000 a year and planning to retire at 65. 

He had two personal pension policies, one worth about £13,800 and the other £1,350, was paying £30 gross into one of the plans and had not reviewed either until he was cold-called.

According to the ombudsman the client's main objectives were recorded as wanting to transfer his benefits for "better investment prospects", invest in an area he was comfortable with, consolidate his plans and have access to external fund managers. 

The adviser recommended the client's funds be transferred to a Sipp, suggesting his current investments were too high risk to suit his profile and were underperforming similar funds in the market at the time. 

The client was advised a Sipp would provide a number of benefits, although there were downsides including higher charges, and the transfer went ahead the following year. 

Represented by a claims management company the client complained to Intrinsic, and ultimately the ombudsman, that the advice to transfer into a Sipp was unsuitable - a claim the Fos agreed with. 

This was despite Intrinsic's protest that the report relied upon by the Fos adjudicator was "over ten years old and pensions legislation and adviser charging has changed since then". 

Ombudsman Roy Milne said: "The advice process started with the client being cold-called. In my view, this is important as it suggests that without this intervention he’d have carried on as he was.

"The client agreement was signed in January 2014. I think this is also important as the client should have been told how much the advice would cost before being advised.

"If he hadn’t agreed to pay for the advice then it seems to me that there is a conflict of interest. Clearly, if the client couldn’t or wouldn’t pay for the advice, then for the adviser to be paid they needed to recommend a transfer." 

Mr Milne said: "There were also some downsides to the transfer that were identified by Intrinsic. By transferring one of his pension plans, the client's provider would apply a small deduction to his fund value.

"And the future annual administration charge would be higher than the client was paying on the larger of his two existing pension plans."